Text material to the presentation held at the MVNO Industry Summit in Barcelona 2009

1. How are MVNO’s changing MNO subscriber
acquisition and retention strategies?
• Can both players go after the same group? Who will win out and why?
• MNO:s encouraging increased ARPU by delivering a richer service environment vs. emulating the
no-frills model by cutting costs
• MVNO as pressure group? Why is MNO:s negotiation?
This is the subjects that we are going to talk a little around during the upcoming 25 minutes. My
name is Freddy Lundmark and I am MVNO Product & Service Delivery Manager within the
Wholesale Department at Telenor Sweden.
I have been working in the Telecom industry with mobile Wholesale for over 8 years now. I started in
2001 at the operator Europolitan in Sweden, a company that was to 70% owned by Vodafone.
Europolitan changed its brand to Europolitan Vodafone in 2001, to Vodafone Sweden on the
autumn of the same year. In the late 2005 Telenor bought the Swedish part of Vodafone Group and
by that we have reached today's brand "Telenor Sweden".
I have consequently worked for 3 companies during these 8 years without changing company...and I
have worked with the Product Track of Mobile Wholesale the whole time! I am a part of the original
team that developed and implemented Europolitan's Wholesale strategy in 2001.
To be able to understand the present situation and strategies it's necessary to take kick-off in the
past.... What was the original Wholesale Strategy for Europolitan back in 2000-2001?
In Sweden the process started with a regulation saying that operators must open up their networks to
other and sell their "over-capacity". What a word! "Over-capacity!!"
Anyone here that has over-capacity in our system? Bandwidth, disk space and processor power that
you never use! Didn't think so! Neither had we! But the regulator is the regulator and the position
then became "If you can’t beat the - join them" - and make some money on it" and after that it's
the position we have taken - you can't stop the market evolution - let's make some business of it
instead.
I have now spent 8 years of my life working with MVNO’s and Service Provider's. To make things a bit
more clear I will take some minute to explain the terminology that we are using in Sweden.
We use the term MVNO for an operator that owns or at least them selves control all their Core
Network Equipment (MSC, HLR, GGSN, SMSC, MMSC and another bunch of abbreviations). The
"only thing" that an MVNO buy from us the access to the radio network and transmission. We
normally use an IMSI-based "home routing" model that means that the MVNO gets all traffic
generated by their customers and then can do whatever they want with it. That means also that in my
world an MVNO (or full MVNO or Rich MVNO or whatever you prefer to call them) also must have their
own interconnection in place.
The term Service Provider is used for an operator that primarily is handling the customer relation
and sales. They normally have no or limited own Core Network equipment - instead they hire the
whole package from us, using sub-ranges of Telenor Sweden's IMSI-range, part of the HLR, MSC etc.
The pros's and con's with the different setups is that an MVNO have total freedom to develop their
own product portfolio, but has of course a significant higher investment to get up-and-running while a
Service Provider is in the reverse situation. Rather stuck with Telenor's basic functionality but with
lower cost-base. We offer this on both prepaid and postpaid setup's

2. I will from now on use the term "MVNO" for both these types of Virtual Operators.
Where does these facts leave us in terms of "How does these Virtual Operators influence us as an
MNO?"
The first reaction inside a MNO when confronted with MVNO’s or Service Provider's (SP's) is to stop
them with their own methods! If the MVNO is cheaper, then "let's lower the price - let's dump the
price so that we kill this newbie". The second reaction within an organization that is not used to
host MVNO's/SP's is to "Get on the phone to the Wholesale Manager and ask him/her what he or she
think they are doing?"
This is from my experience the first automated reaction from the MNO. Here we touch into on of the
topics: "MNO:s encouraging increased ARPU by delivering a richer service environment vs.
emulating the no-frills model by cutting costs".
What we as an MNO should do when confronted with a low-cost, no-frills MVNO/SP is to believe in the
strength of our brand and ask our selves "What can we do that our virtual competitor can't?"
Its obvious that an MNO - owning and controlling their own network - is much much better
positioned to deliver a richer service environment, more advanced services and a much richer
customer experience than an MVNO or SP. At least if you look at the resources available and little
overlook that a big MNO often have more complex processes and longer time-to-market than a
MVNO
But still, I think that an MNO shall use the power and knowledge to hand giving the customer
something a no-frills MVNO can't give. It's a dead-end to try to emulate the low-cost model
under the MNO:s brand, if it shall be done then it shall be under a low-cost sub-brand.
At the rock-bottom it's all about how much you believe in your own brand! If I, as MNO, don't
believe enough in my own Brand Power to take the fight with an MVNO on my own network, then I
probably have other problems that I should address first! Do what you are doing best!
Is it the totally out of scope for an MNO to make a "copy" of a low-cost, no-frills MVNO. Of course not
- but I think that once always shall address the questions: "What are we doing best?", "Is it
possible to reach this customer group with our brand - are we good enough to deliver the
right value for this customer group?". Yes or No?
Now - if we turn the perspective upside down! I've been talking about what I feel that MNO:s shall do
and not do. But how about the MVNO’s? What shall they do and not do? Why is this so
important? Is it important?
Yes! It is!
The relation between an MVNO and MNO is a complex one. Refer to the reasoning above. There are
always a lot of feelings involved in these kinds of affairs. To be honest - on the MNO side - much of
the "thinking's" and decisions is taken rather much on an emotional base and not from a
strict logical and business oriented perspective. Even if that would be the ideal situation.
Given that fact it's important when you as an MVNO is meeting and discussing or negotiating with
representatives from the Wholesale department of the MNO to bear these facts in mind. Much of the
decisions are made on emotional grounds. Furthermore - the newer the MVNO presence on a
market is the more of the decisions is made this way.
It can many times make the discussions with your host operator easier. Help the Wholesale team to
convince internally that you are on the same side as they are, and I promise you - they need your
help! Ask me! I know! Don't forget one of the most important pieces in business relations:
"Confidence and Trust between the parties!"
This takes us to the next "bullet": "Can both players go after the same group? Who will win out
and why?".

3. What do you think? Can both players go after the same group? Who will win out and why?
From my point of view the answer of the first part of the question is both "Yes & No" at the same
time! Yes - Both the MVNO and their host operator can have the same segment as their core
segment. No - It will not be good business for anyone!
For the MVNO it will probably mean spending a lot of money and efforts to win customers that
soon will be taken back by the host operator. To be honest - their is one small advantage (who I
as representative for an MNO dislike very much) for the MVNO in this scenario: It's a fact that it in
some cases and in the short term it can be simpler for the MVNO to win customers from the
MNO because the MVNO can say:
"Hey there - come to us! We're on xxx:s network - the same network as you have today!
You will have the same network feeling and coverage as customer to us but you can pay
less!"
I would classify this as some kind of suicide argument! Don't try that - what's happening here is
that the MVNO and MNO goes head-to-head after the same customers and from the MVNO with what I
think is rather bad arguments!
We can here go back to what I said earlier about the MNO believing in the strength of their own brand
- here we have the reverse situation! Using this "same-same but cheaper" argument is the
same as the MVNO saying: "We don't believe in our brand strength and core proposition
ourselves either so let's do a copy-paste on our host and use their brand strength".
What will happen on the MNO side in this kind of scenario? Hmm - They will look at their figures and
see that they will have an unusual high porting churn from them to the MVNO. After that they
will probably say to the MVNO something like this:
"Hey! You want some more functionality! OK - Tricky right now! Lot to do internally - Can't
promise anything and by the way your wholesale prices must be increased due to fact a, b
and c on the market. And you - Don't call me I will call you!"
Now we have an excellent illustration of a loose-loose situation that both parts have contributed to!
But it will hurt the MVNO most because the MNO is controlling the absolute most important part
of the MVNO’s business - The Mobile Network!
What I'm saying here is: Yes! Both players can go after the same customer's but it won't be
good for anyone - and more important and illustrated by my little role play above: The MNO will
always win this kind of battle - They control The Mobile Network!
How shall we do instead? From my perspective - and from a very mature market perspective - the
answer is segmentation and niche-orientation!
The key to a successful partnership is to find models where the parties "Don't step on each others
toes to much". How is this achieved? It takes two to tango! Let's go hands on!
MVNO's:
Be perfectly clear on who's your customer's and why they should choose you as their
operator.
Make sure that the "why" argument is not built up of the "same-same but cheaper" as described
above!
Make sure that you know your customers inside and out - see above!
Team-up with one of the smaller MNO's on the market - best maybe is the smallest! Why?
Simple - the lower market share the higher interest there is from the MNO to grow and that can be
done in a simple and cheap way with MVNO’s.

4. Make sure that you have enough money and time - success does not come for free and it
will take some time.
The better you know your customer and why they shall choose you - the faster this process will go!
Build a long-lasting trustful partnership with your MNO.
You are totally dependant on your host operator - make sure that you have a good relation to that
part. Put pressure on your supplier here but do it in a structured and relevant way. See to that you for
example have a road map for product development that the MNO can use for their planning.
MNO's
Trust the strength of your own brand!
You are the stronger part in this relation - trust your brand strength and do the business that you
think is right for you! But don't forget that it takes two to tango!
Don't believe in the myth of cannibalization
It's a myth - cannibalization is on an overall level equal to your market-share. OK if the market share is
50% half of your MVNO’s customer will come from your brand. Fine! What is the alternative?
Say no and MVNO goes to someone else and you will end up with the same churn BUT to another
network. If you were the one having the MVNO as your customer the churn would have been to
"yourself". Besides that - the pure margin of an MVNO-customer is for the MNO often better than the
margin on a customer under own brand. Yes I know that there are other values in "owning the
customer" but just to give some perspective on the question.
In the early stage of the market development a operator (often the smallest) can se a Window of
opportunity!
After a while, and hand-in-hand with the mobile market (or more correct the communications market)
gets matured and now the driver for an MNO to do this business radically changes. Ask me! I Know!
Here we come to "MVNO as pressure group? Why is MNO:s negotiation?"
In a mature market, where the only way of growing customer base and revenues, is to take them
(buy them?) from competitors the Wholesale models suddenly gets interesting again! It's a
rather simple mathematics - even if the process of getting there (beyond the very strong will to own
the customer under my own brand) is long and mentally very hard - but at the end "Money talks". I -
to be frank - I don't think that this is limited to a mature market. By entering into the Wholesale /
MVNO arena also MNO:s in evolving markets can add much to their bottom line!
Simple mathematics! Let me illustrate!
In Sweden we from some kind of strange tradition we put in rather large subsidies for the hardware
(the phone) this means that it is a very very expensive business to grow with new customers because
all customers expect to get the phone with a kick of about 100 Euro. We have had substantial price
erosion in Sweden where it today is rather hard to get paid for the traffic. This means that we can
have acquisition costs on 100-200 Euros maybe in many cases more per postpaid customer. It's
hard to grow customer base - and it takes hard tribute from your cash-flow.
Compare this with taking on a MVNO that pays for the traffic, finances their customer
acquisition's themselves and on top of that only puts margin cost on the OPEX for running
the network. We have the network and now it's only a question of filling it up!
But, nevertheless, here you have one of the core reasons for an MNO to negotiate and sign deals with
MVNO’s. Another is linked to the question: "What choice do you have?"
Say like this - I get proposal from a potential MVNO: "Can we run our business on our network?"
Here I can answer "Yes" or "No". If I say "No" the MVNO will most probably go to another MNO and
sooner or later get the deal. What have happened? I have got the competition that did not want to have
but I don't get any money from it! Too bad! Here we ends up in what’s called the prisoner’s dilemma!

5. What can we learn from this?
1) There is always some kind of harbor for a dedicated MVNO. If the market is enough
competitive some MNO will sooner or later open their network for the MVNO
2) The real choice is "Do we want the competition and the money or do we only want the
competition?"
As you might heard we have done a lot of thinking in this area during these 8-9 years in this business,
and Telenor in Sweden is doing this, not because we are forced to it but, because we see it as good
business for us!
Welcome to us if you are planning to expand your business into Sweden!